NANTUCKET, Massachusetts—Starwood Hotels & Resorts Worldwide is keying on emerging international markets to help fuel its growth.
The latest example: Starwood announced Tuesday it signed an agreement with Silk Way Airlines LLC to open the 207-room Sheraton Baku Airport Hotel in Azerbaijan. Starwood is focusing on increasing its brand penetration in emerging markets with 137,000 rooms in the markets and another 70,000 in the pipeline, the company’s VP of investor relations Jason Koval said Tuesday afternoon at the Jefferies 2011 Global Consumer Conference, which was also webcast.
• View Starwood’s presentation here.
In fact, of the 79,000 rooms Starwood has added since 2000, 70% were brought on outside the United States. And 50% of Starwood’s portfolio of owned hotels is located outside the U.S. As of the end of the first quarter, Starwood’s pipeline was comprised of approximately 350 hotels representing approximately 85,000 rooms.
“We’ve been a leader in these international markets and we’re really leveraging that head start,” Koval said.
The company is betting that gross domestic product in the world’s emerging markets will bloom during the next decade, and Starwood wants hotels on the ground in order to take advantage of that growth.
“We’re transforming on multiple levels,” Koval said.
In China, Starwood has 70 hotels with another 90 in the pipeline. “Over the next 10 years, this market could be our largest market (overall),” Koval said. “It’s already our largest market outside the U.S.”
India and Brazil are also countries of importance to Starwood, he added.
Business update
Koval also provided a business update for Starwood. Business travelers are hitting the road again, he said. That’s an important development for Starwood, because 75% of the company’s business is derived from business travelers.
“As long as corporate profitability remains strong, these companies will travel … and that drives our lodging demand,” he said.
The ability to drive rate will “make or break” the company’s success, Koval said. “We’re going to be very aggressive pushing rate,” he said.
The company recorded a profit during the first quarter of US$26 million, down slightly from US$28 million during the same period a year ago. Hotel operating income, meantime, was up 28.4% to US$122 million.
“We think we have a long runway ahead to increase profits at our owned hotels,” he said.